Simon Doonan has begun a slow, painful march toward the exit at Barneys New York.

The 59-year-old fashion Brahmin — famous for the quirky window displays he has conjured for the trendy luxury chain for nearly a quarter-century — has been named “Creative Ambassador-at-Large.”

Barneys yesterday insisted the flaky new title amounted to a promotion, as it ousted Doonan from his longtime role as creative director and replaced him with Dennis Freedman, a veteran editor at W magazine.

But fashion insiders said the switch is the latest signal that CEO Mark Lee, who took the helm of Barneys last September, is pushing aside top company vets as he looks to make over the struggling retailer according to his own vision.

“Simon has been the face of Barneys for a long time, and you could say that face just got a slap,” said one source close to the company. Added another: “Nobody gets promoted to anything with ‘at-large’ in the title.”

Last month, a Barneys spokesman told The Post that Doonan has been “very supportive” of Lee since the ex-Gucci honcho took over at Barneys despite the fact that Lee in November abruptly fired Doonan’s close friends Julie Gilhart and Judy Collinson, the retailer’s fashion director and head women’s clothing merchant, respectively.

Together, Gilhart and Collinson had spent nearly 40 years at Barneys and were responsible for much of its success. Now, they’re out of work.

Doonan has appeared reluctant to give up his Barneys gig, which for years has paid him handsomely despite the fact he is technically an outside contractor and “doesn’t show up to the office five days a week,” according to one source.

Nevertheless, the source added that in a recent meeting Doonan “didn’t seem to be his normal self — he seems pretty sad about the whole business.”

Lee — who drew criticism in fashion circles for his quick, cold dismissal of Gilhart and Collinson — took pains yesterday to heap praise upon Doonan, calling him, in a statement, an “intrinsic part of the Barneys DNA.”

In the same statement, Doonan said, “This exciting evolution of my role at Barneys is brilliant. Change has always been integral to the strength and vibrancy of the Barneys brand. I am delighted to be part of this new chapter.”